1985 (4) TMI 83 - AT - Income Tax

Summary

Issues:
1. Transfer of copyright income to daughters-in-law and married daughters.
2. Applicability of sections 60, 61, 62, and 63 of the Income-tax Act, 1961.
3. Accounting method followed by the assessee.
4. Revocable nature of the transfer of copyright income.

Detailed Analysis:

1. The appellant, a retired individual, transferred the copyright of his book to his daughters-in-law and married daughters for their maintenance and education. The deed specified a 15-year period for the transfer after which the copyright would revert back to the appellant. Another agreement assigned income from books published by Student Friends to the married daughters. The appellant contended that this income did not belong to him but to his daughters. The Income Tax Officer (ITO) disagreed and assessed the income in the appellant's hands.

2. The ITO held that the income from both sources was assessable to the appellant under sections 60 and 61 of the Income-tax Act, 1961. Section 60 deals with income arising from the transfer of assets without transferring the assets themselves. Section 61 states that income from a revocable transfer of assets shall be included in the transferor's income. The Appellate Assistant Commissioner (AAC) upheld the assessment of income from Student Friends under section 60 but excluded it due to non-receipt in that year. However, he excluded the income from Lok Bharti based on a different interpretation.

3. The appellant claimed to follow the cash system of accounting, arguing that income should only be taxed when received in cash. The AAC accepted this claim, leading to the exclusion of income from Student Friends. The ITO and the departmental representative argued that the appellant followed the mercantile system, making income assessable when due, not received.

4. The department challenged the AAC's decision regarding income from Lok Bharti, claiming the transfer was revocable under section 63(a) and fell under section 61. The appellant argued that the transfer was irrevocable for 15 years, citing section 62(2) for the timing of taxability. The Tribunal analyzed sections 61 to 63 and determined the transfer as revocable, thus making the income assessable to the appellant under section 61.

In conclusion, the Tribunal partly allowed the appeals, upholding the assessment of income from Lok Bharti in the appellant's hands under section 61, contrary to the AAC's decision.